Question

Mr. Tuck and Ms. Under organized a new business as an LLC in which they own equal interests. The new business generated a $4,600 operating loss for the year.

If Mr. Tuck's marginal tax rate before consideration of the LLC loss is 35 percent, compute his tax savings from the first-year LLC loss. Assume the excess business loss limitation does not apply.
Tax savings _____

Answer 1

Mr. Tuck's tax savings from the LLC's first-year operating loss is $1,610, calculated by applying his 35% marginal tax rate to the $4,600 loss.

Step-by-step explanation:

The calculation of Mr. Tuck's tax savings from the first-year LLC loss involves the application of his marginal tax rate to the amount of the loss. Since Mr. Tuck is in the 35% marginal tax bracket and the LLC generated a $4,600 operating loss, we multiply the loss by his tax rate to find the tax savings.

To compute the tax savings, the formula is: Tax Savings = Operating Loss x Marginal Tax Rate

So, for Mr. Tuck, his tax savings would be:

$4,600 x 35% = $1,610

Hence, Mr. Tuck's tax savings from the first-year LLC loss would be $1,610.